Caregiving responsibilities can be a heavy burden for families, causing significant and profound emotional, financial, and physical strain. New parents, for example, are often forced to make difficult decisions between working and caring for their child. And, when parents do work, they need to know that their child is being cared for in a safe, healthy, and appropriate environment. 

 

Not only does this significantly affect children and families, but it also greatly impacts our national economic growth and labor force participation. Without question, business productivity can suffer if parents sacrifice labor productivity because of limited caregiving options.

 

Currently, there are two primary Internal Revenue Code (IRC) employer tax credits designed to help businesses offset the costs of providing family-focused benefits to their employees.

 

The 45F Employer Credit for Child Care was originally created by Congress on a temporary basis in the 2001 Economic Growth and Tax Relief Reconciliation Act. The legislation was extended and then finally made permanent in 2012. The credit incentivizes companies to provide access to child care for their workers. Acceptable expenditures include the cost of contracting with a childcare facility; constructing or improving property to be used as a childcare facility; associated operating costs; or for providing referral services to the employees.

 

Under the Family and Medical Leave Act (FMLA), private-sector employers with 50 or more employees are required to provide unpaid leave for qualifying events, such as the birth or adoption of a child; caring for a seriously ill spouse, child, or parent; and an employee’s own serious health condition. To be eligible, an employee must have worked for the company for at least 12 months and have logged at least 1,250 hours during that time.

 

The 45S Employer Credit for Paid Family and Medical Leave is a federal tax credit that helps businesses offset the costs of providing paid family and medical leave benefits to their workers. To qualify, employers of any size must have an active policy that provides all eligible employees with at least two weeks of paid family and medical leave annually and covers at least 50 percent of wages normally paid. The credit can be used to cover up to 12 weeks of leave for all eligible full- or part-time employees and offsets between 12.5 percent and 25 percent of an employer’s costs for wage replacement on a sliding scale (i.e., companies that provide a 50 percent wage replacement can claim a 12.5 percent, with the credit rate increasing gradually to 25 percent as wages covered increase from 50 percent to 100 percent).  

 

The One Big Beautiful Bill Act (OBBB) made the 45S credit permanent. Plus, employers can now use the credit to cover the costs of obtaining paid family leave insurance and apply it toward up to 25 precent of the premiums. The OBBA also lowered the minimum employment tenure requirement from 12 to six months and allows businesses to claim the credit for leave provided in states without paid leave mandates, or for leave provided over and above what is mandated by state and local programs.

 

SO, WHERE DO WE GO FROM HERE?

​

This is all an impressive start, but at least one major problem still exists: Most of these tax credits are claimed by large corporations rather than small and mid-sized businesses. This means that the tax credits don’t guarantee access to paid leave for all workers and intensifies the competitive disadvantage that smaller and mid-size businesses face. For instance, many large companies have the wherewithal to offer extensive paid leave alternatives to their employees, while most workers below median income still receive no paid leave.

​

1787 would never support an employer mandate for paid leave or child care – especially since it would be nearly impossible for small businesses to absorb the cost, and could result in higher prices for consumers, reduced wages, hiring and pay discrimination, and/or a reduction in employment.

​

However, we are exploring new ideas to make these programs more inclusive and affordable for all working people and businesses of all sizes.

​

Stay tuned to this page for updates on our progress!!